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Lok Sabha debates GST Bills: Ten things you need to know about the new tax

The Lok Sabha will debate four crucial biils required to implement the Goods and Services Tax (GST), the biggest indirect tax reform since independence, from July 2017. Here are the 10 things that you need to know about the new tax regime:

business Updated: Apr 14, 2017 09:15 IST
Raj Kumar Ray
Raj Kumar Ray
New Delhi, Hindustan Times
GST,GST Bills,Lok Sabha
Finance minister Arun Jaitley, junior finance minister Santosh Gangwar, revenue secretary Hasmukh Adhia and others at a GST Council meeting, at Vigyan Bhawan in New Delhi on Saturday. (PTI)

The Lok Sabha will debate on Wednesday four crucial bills required to implement the Goods and Services Tax (GST), the biggest indirect tax reform since independence, from July 2017.

Here are the 10 things that you need to know about the new tax regime:

1) Constitution amended for GST

The government amended the Constitution, which requires approval from two-third of members in both the Lok Sabha and Rajya Sabha, to switch over to GST from the present tax regime at the Centre and states.

The Lok Sabha passed the Constitution (One Hundred Twenty Second Amendment) Bill on May 6, 2015.

The BJP-led National Democratic Alliance government took months to bring all opposition parties on board so and move the Bill in Rajya Sabha where the ruling party does not enjoy a majority.

On August 3, 2016, the Rajya Sabha approved the Bill after a marathon debate and with some changes. On August 8, the Lok Sabha approved the amended bill.

2) India as a common market with one tax

The GST will unify India into a common market with one tax across all states, which will eliminate the present cascading impact of a plethora of central taxes.

Central taxes such as Central Excise Duty, Additional Excise Duty, Additional Customs Duty and Service Tax will all be merged into one CGST.

State levies such as VAT, sales tax, entertainment tax, purchase tax, mandi tax, luxury tax, octroi and entry tax, will be subsumed into SGST.

The Centre will levy the Central GST and Integrated GST, while states will impose the SGST.

3) Four-slab GST structure

The new regime will have a four-slab structure of 5%, 12%, 18% and 28%.

There will be no tax on several items including rice, wheat and other essential items, which constitutes 50% of CPI inflation basket.

The lowest tax rate of 5% is proposed for items of mass consumption used by common people such as spices, tea and mustard oil.

There will be two “standard” rates of 12% and 18% covering most manufactured items and services.

The highest tax rate of 28% will be imposed on items like luxury cars, pan masala, tobacco and aerated drinks. These items are currently attracting a tax of 27-31%.

4) States to get compensation if there is revenue loss

The Compensation Bill will ensure states will get fully compensated for the first five years if there is a revenue loss after GST is rolled out.

The money for this compensation will come from compensation fund created from cess that the Centre will charge on certain goods.

5) Dual control on assessing taxpayers

The Centre and states will both assess taxpayers having with an annual turnover of Rs 1.5 crore.

States will the power to assess taxpayers below Rs 1.5 crore in turnover.

For North Eastern states those with an annual turnover of Rs 10 lakh or below will be exempt from the ambit of GST, for the rest of India this limit is Rs 20 lakh.

6) Will GST lower tax burden

GST will be a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition.

The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. Revenue secretary, Hasmukh Adhia has said that GST will reduce tax burden on the common man, but all will depend on where goods and services are fitted in the GST slabs.

7) How will consumers benefit

Consumers now pay higher taxes as multiple levies are imposed --- one over the other --- at various stages starting from production to the retail sales.

GST will be a single and transparent tax proportionate to the value of goods and services.

GST will eliminate the cascading impact of multiple indirect taxes being levied by the Centre and states, with incomplete or no input tax credits available at progressive stages of value addition.

8) Will industry benefit from GST

For India Inc, GST will ensure easier compliance through the GST Network (GSTN) platform. A seamless tax-credit system throughout the value chain and across states will ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

All services such as registrations, returns and payments will be available to the taxpayers online, which would make compliance easy and transparent.

GST will help India improve its ranking in the ease of doing business.

9) GST impact on inflation

Initially, GST may lead to a higher inflation as many services and manufactured products get costlier and as compliance improves.

However, GST will help moderate inflation in the medium to long term as the cascading impact of taxes goes.

10) Will GST help the economy

The GST is widely perceived to help in accelerating economic growth by 1-2 percentage points as it shores up revenues of Centre and states, which can be invested in infrastructure and social schemes.

First Published: Mar 29, 2017 11:07 IST